Standard Deductions: A portion of your income not subject to tax that can be used to reduce your tax bill.
Standard deduction amounts
The amount of your standard deduction depends on the filing status you qualify for. In 2019 for example, single taxpayers and married taxpayers who file separate returns can claim a $12,200 standard deduction. Married couples filing jointly can claim an amount that’s twice as large, $24,400, and taxpayers filing as “head of household” (single individuals with dependents) can claim a standard deduction of $18,350.
Alternative Minimum Tax(AMT): An income tax calculated using a different set of rules meant to ensure certain taxpayers pay at least a minimum amount of tax. (AMT payers, who typically have relatively high income, essentially calculate their income tax twice, and then pay the higher amount owned).
How to avoid paying ATM
Lowering your adjusted gross income by maxing out contribution to a 401(K), IRA or health savings account can help, for example, as can keeping an eye on the size of your long-term capital gains.
If you suspect that you might own AMT, consult us to help you with the additional paperwork and reduce or avoid the tax.
- Medical Expense Deduction
- In general, you can deduct qualified, unreimbursed medical expenses that are more than 10% of your adjusted gross income for the tax year, up from 7.5% in 2018.
- State and Local Tax Deduction
- The State and Local Tax(SALT)Deduction lets you deduct up to $10,000 total in combined property taxes and state and local income taxes or sales taxes(but not both).
- Interest Deduction
- Mortgage Interest Deduction
- In general you can deduct the mortgage interest you paid during the tax year on the first $1 million of your mortgage debt for your primary home or a second home. If you bought the house after Dec. 15, 2017, you can deduct the interest you paid during the year on the first $750,000 of the mortgage.
- Investment Interest(Attach Form 4952 if required)
- Investment interests is interest paid on money you borrowed that is allocable to property held for investment. It doesn’t include any interest allocable to passive activities(such as rental activities or any business in which the taxpayer does not participate)or to securities that generate tax-exempt income. Complete and attach Form 4952 to figure your deduction. Exception. You don’t have to file Form 4952 if all three of the following apply. 1. Your investment interest expense is less than your investment income from interest and ordinary dividends minus any qualified dividends. 2. You have no other deductible investment expenses. 3. You have to disallowed investment interest expense from 2018.
- Mortgage Interest Deduction
- Gifts to Charity
- In general, you can deduct up to 60% of your adjusted gross income via charitable donations, but you may be limited to 20%, 30% or 50% depending on the type of contribution and the organization(contributions to certain private foundations, veterans organizations, fraternal societies, and cemetery organizations come with a lower limit, for instance).
- Gambling Loss
- The Internal Revenue Service(IRS)views gambling wins as income, and therefore requires people to pay tax on the winnings. It allows people to deduct their gambling losses if they itemize their deductions. Gambling losses that are deducted cannot exceed the winnings reported as income. So if a gambler has $3,000 in winnings but $7,000 in losses, he or she can only deduct $3,000. The remaining $4,000 cannot be written off or carried forward to future years. If a gambler has $3,000 in winnings and $1,000 in losses, he or she can report the $3,000 as income and then claim the $1,000 as an itemized deduction.
- Income Limitation for Itemized Deduction
- You are subject to the limit on certain itemized deductions if your adjusted gross income(AGI)is more than $313,800 if married filing jointly or Schedule A(Form 1040)qualifying widow(er), $287,550 if head of household, $261,500 if single, or $156,900 if married filing separately. Your AGI is the amount on Form 1040, line 38.
- Casualty and theft losses
- The TCIA limits the casualty and theft loss deduction to losses sustained due to events that occurred in locations that have been declared to be disaster areas by the U.S. president.
- Other Itemized Deduction: Subject to the 2%
- These deductions allows to deduct only the amount of expense that is over 2% if the Adjusted Gross Income, or AGI.